In most companies across multiple industries, a small percentage of the sales force produces the bulk of sales. It’s called the 80/20 rule or Pareto Principle and is generally considered accurate with slight variations in the numbers. Unfortunately, that principle does not apply when measuring how many leads you need at the top of the funnel to produce sales at the bottom. Over the years, working with sales teams selling technology-based solutions, I have seen trends repeat themselves. One of these trends is underestimating how many qualified leads you need at the top of the sales funnel to close a sale at the bottom.
Breaking Down the Sales Funnel
To better understand what it takes to turn leads into closed deals, I break down the conversion rates typically seen in a top-performing sales funnel. Looking at each stage can help set your expectations and optimize your approach.
Raw Leads: Raw leads populate the top of the funnel. These result from your multichannel marketing efforts and the responses generated from lists curated by your SDR/BDR team or inbound from your website, ads, and social channels. These leads result from casting a wide net to capture as many potential leads as possible. These are individuals or companies who have shown initial interest but haven’t been vetted yet.
For demonstration purposes, let’s say you end up with 125 raw leads at the top of your sales funnel from the efforts of the marketing and SDR/BDR teams.
Qualified Leads: Out of these raw leads, approximately 20% (25) should convert to qualified leads. These leads have been evaluated and meet specific criteria, indicating a higher likelihood of conversion. At this stage, it’s crucial to have a robust process for evaluating and qualifying leads to ensure they are worth pursuing.
Sales Leads: From the qualified leads, around 80% (20) convert to sales leads. These are leads that the sales team has accepted for further engagement. They have shown genuine interest and are deemed ready for direct sales interaction in the form of a live 30-minute meeting/demo. This stage requires effective communication and alignment between marketing and sales teams to ensure a smooth transition.
Opportunities: You should estimate that about 25% (5) of your sales leads will convert to opportunities. Opportunities are prospects who have participated in a live 30-minute meeting/demo or made a similar investment in their time understanding your company’s value proposition and differentiation. From this engagement, they have requested a next step such as a proposal or sales quote.
Closed Deals: You should estimate that about 20% (1) of your opportunities will convert to actual sales.
So, expect to put the work and investment into getting raw leads into the top of your funnel and ensure you have good processes and communication between your marketing, SDR/BDR, and sales teams.
The Importance of Volume
One key takeaway from these metrics is the sheer volume of leads needed at the top of the funnel to achieve sales at the bottom. To convert just 20 raw leads into sales accepted leads, you typically need to start with 125 raw leads. This underscores the importance of generating a large number of qualified leads to maintain a healthy pipeline.
See my article “Essential Strategies for Securing Demos and Meetings in a Tough Market” for a detailed strategy on how to build your Sales Funnel.
Strategies to Improve Conversion Rates
Enhance Lead Generation: Focus on quality over quantity. Ensure your SDR/BDR team has a clear profile of your ideal customer so they can curate targeted lists of cold prospects for cold emails and calls. Use targeted marketing and ad campaigns to attract leads that are more likely to convert. Employ SEO, content marketing, and social media to reach your ideal prospects. Leveraging AI sales automation can help streamline this process, allowing for more efficient and targeted outreach.
Streamline the Qualification Process: Implement a robust lead scoring system to efficiently identify qualified leads. Use data-driven insights to refine your criteria and ensure you’re focusing on the most promising leads. Sales process automation can significantly reduce manual tasks and improve accuracy in lead qualification.
Strengthen Sales and Marketing Alignment: Foster collaboration between sales and marketing teams. Regular meetings, shared goals, and integrated tools can help ensure a seamless transition from a qualified lead to a sales lead. Sales AI technology can facilitate better communication and alignment between teams.
Personalize Sales Outreach: When your SDR/BDR teams reach out to cold prospect lists, use personalized messaging for targeted B2B prospects and tailored solutions to engage with leads. Address their specific needs and pain points to build trust and demonstrate value. AI-powered sales solutions can help in creating personalized messaging for targeted B2B prospects.
Monitor and Optimize: Continuously track and analyze your funnel metrics. Identify bottlenecks and areas for improvement, and adjust your strategies accordingly. Advanced sales AI can provide insights into your sales process and suggest optimizations to improve conversion rates.
Understanding the real conversion rates of a top-performing sales funnel is crucial for setting realistic expectations and optimizing your sales efforts. By focusing on generating a high volume of qualified leads and effectively managing each stage of the funnel, you can improve your chances of converting leads into loyal customers. Remember, approach cold prospects with a “serve not sell” mentality. The journey from stranger to customer requires trust building, which requires patience, persistence, and a strategic approach. Keep refining your process, and you’ll see better results over time.
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About Rob Craig
Rob has spent his career entering cold markets in the U.S. and Canada to establish recurring revenue models and sell SaaS-based enterprise software and solutions to Fortune 500 companies and SMBs. He has founded and built four successful, sales-centric tech start-ups, including Stratford Technologies, ActiveStream, 3 Tier Logic, and AutoNow.
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